Contracting for Goods and Services in the Manufacturing Industry

In collaboration with mfgCON partners, we present a guest-blog from Revolution Law about manufacturing and navigating the unique challenges of contracting for goods.

Manufacturers face a number of complex issues related to buying and selling products as well as the procurement of specialized services. By successfully navigating these issues, a manufacturer is better positioned to succeed in the global marketplace while also reducing business disruptions. Manufacturers can increase the likelihood of successfully navigating these issues by implementing a combination of both business and legal solutions.

This article will summarize key issues manufacturers should be aware of when contracting for goods and services. First, contracting for goods and contracting for services require differing analyses and a review of different bodies of law. For example, Article 2 of the Uniform Commercial Code typically governs contracting for goods, whereas contracting for services is typically governed by common law. Some manufacturers have standard purchasing or selling terms listed in “fine print” on their standard purchase orders or confirmations and unfortunately, others do not. In a subsequent dispute, the manufacturer with the standard terms included in their standard documents is at a substantial advantage over a manufacturer that does not incorporate such terms.

Second, contracting for services can create equally challenging issues simply due to the nature of intangible services. For example, a manufacturer hiring a consulting firm to review and assess its operational processes will want to include details about the specific services being provided, what milestones, deliverables, and timelines is the consulting firm required to meet, and how and when will fees be paid to the consulting firm. The answers to these questions must be carefully addressed before entering into a contract with the service provider.

Third, the Internet has made it much easier to build an international presence, even for smaller manufacturers. Contracting for goods and services internationally requires manufacturers to address what body of law governs any future disputes, where and how will disputes be resolved, who is responsible for meeting import/export regulations, who pays the shipping costs, or when does risk of loss transfer. Addressing and negotiating these issues up front will reduce the cost of future disputes and help maintain uninterrupted operations.

The issues raised in this article are starting points for manufacturers to think about as they contract for goods and services. To help manufacturers think through these issues, we hope to educate North Carolina manufacturers in a four-part series specifically tailored to help manufacturers address common issues and ensure contractual provisions are in place to minimize risk. The series will consist of: (1) Transacting for Goods, (2) Transacting for Services, (3) Standard Terms and Conditions, and (4) International Contracting. The first part of the series on Transacting for Goods can be found here at: http://www.revolutionlaw.net/news-resources/